Millions of savers are set to lose a fortune as the interest rate paid on
longer-term saving products plunges to the lowest level for at least nine
years.

Experts last night said savers were the "forgotten victims" of the credit crisis as the Bank of England said the average interest paid on time deposits and saving accounts such as one year bonds had slumped from 2.06 per cent to 1.85 per cent in the past month.

It's the first time the figure recorded by the Bank has dropped below 2 per cent since current records began in 2004.

Industry insiders blamed the Government's high profile Funding for Lending scheme, which is designed to flood banks and building societies with cheap money, in the hope this is in turn passed on to small businesses.

While lending is creeping up, analysts claim banks and building socities no longer have to offer attractive rates to customers to attract deposits.

Andrew Hagger, personal finance expert at MoneyComms said: "In the past year the interest on one year bonds has fallen by 41 per cent.

"Ever since Funding for Lending came in the interest rates on savings products has dropped as banks don't need customer deposits as much as they used to."

Campaigners last week branded Funding for Lending a "silent assasin" and claimed savers had already lost out on £2.6 billion-worth of interest on their savings pots since the scheme began almost a year ago.

They said the falling interest rates are directly linked to the first downturn in pensioners financial outlook since the credit crisis began.

Ros Altmann, pensions consultant, said the losses were only going to grow. An estimated 500,000 fixed-rate, one, two or three-year bonds will "mature" each month for the rest of 2013, meaning customers will see a sharp drop in the interest they earn as they are forced to put their savings in new products on lower interest rates.

Ms Altmann said: "Nobody wants savers' money as they can get all they want through from cheap money schemes created by the Bank of England or loans underwritten by the Government. Banks don't have to offer as much to savers.

"At the same time the Bank of England has pushed up inflation through Quantitative Easing so people are losing money in real terms. Savers are the forgotten victims, the overlooked victims and we have to start valuing savers again."

Government-backed National Savings & Investments last week blamed tumbling interest rates across the country as it cut the prize money on offer to Premium Bond holders. NS&I argued it was becoming too competitive with lenders in the private sector.

Yesterday's blow came amid further signs the economy may finally be on the mend. Business chiefs at the CBI said high street sales rose for the first month in five in July, led by a big increase recorded by clothing chains. The Bank of England separately revealed that lending to small business was rising at the fastest pace for two years.